Startupedia: What Does Crowdsource Mean?

What is crowdsourcing?

Crowdsourcing is the process of collecting ideas, services, or content from a large group of people, usually online. The word is a portmanteau, blending the words “crowd” and “outsourcing,” and crowdsourcing means exactly that. When a company crowdsources, they are in effect outsourcing a need to a larger, external community. Still, crowdsourcing differs from outsourcing in that the contributions are not sourced from a specific, precontracted person or group, but from an undefined public.

Technological advances in everything from product design software to digital video cameras are breaking down the cost barriers that once separated amateurs from professionals. Hobbyists, part-timers, and dabblers suddenly have a market for their efforts, as smart companies in industries as disparate as pharmaceuticals and television discover ways to tap the latent talent of the crowd. The labor isn’t always free, but it costs a lot less than paying traditional employees. It’s not outsourcing; it’s crowdsourcing.

Collaboration on the web is growing exponentially, and variations on the word such as crowdfunding, crowdsearching, and crowdtesting break this giant umbrella of “crowdsourcing” into more specific (though hardly bite-sized) chunks.[bctt tweet="#Collaboration on the web is growing exponentially. #crowdsourcing"]

Crowdfunding:

Crowdfunding is the process of raising money or donations to fund a project, product, or service. There are two main models of crowdfunding. In donation-based crowdfunding, individuals make financial contributions to a project without any expectation of a financial return on that contribution. While this funding may, in many cases, go toward helping a business, the contributors do not become stakeholders in the business. Crowdsourcing platforms and campaign that employ this model typically also use a reward or incentive system to help stimulate contributions.

These examples of crowdfunding sites use the donation model:

Kickstarter is one of the earlier and more widely-known donation-based platforms, meant specifically for creative projects, rather than businesses, charities, or personal financing needs. To be clear, companies may crowdsource to fund a project or initiative, but not to fund the business at large. Some startups use Kickstarter to perform market research on their MVP.

Crowdrise is donation-based funding platforn for causes and charities.

Quirky facilitates collaboration and crowdfunding for inventors and makers.

The second, more recent model of crowdfunding is investment-based. In this instance, startups seeking capital sell ownership stakes and equity online in the form of equity or debt.

Crowdfunder helps startup companies to raise Seed and Series A rounds with one of the fastest and largest growing networks of investors.

AngelList serves as a platform to help accredited investors and institutions find and fund promising tech startup deals.

Crowdtesting:

In the software industry, crowdtesting leverages the benefits and efficiency of the online community. Because testing is carried out by different testers from a range of places, new software can be put to work under diverse realistic scenarios—making the tests more reliable, fast, and cost-effective.

Crowdsearching:

Chicago-based startup Crowdfind is the world’s first virtual lost and found—building virtual search parties of internet users to find and return lost items, pets or even people.

Of course, crowdsourcing isn’t limited to the business world. There’ve been many instances as of late where the public has leapt to join in investigation and search efforts through their own tech savvy and expertise.

Other examples of crowdsourcing:

Waze uses crowdsourcing to glean information about traffic and travel conditions and share with other users.

Marketers at Coca-Cola have crowdsourced ideas for a range of campaigns, including leveraging social media and hashtags for content and ideas for “Where Will Happiness Strike Next.”

And, CEO of Yahoo! Marissa Mayer famously crowdsourced her baby’s name (although, if you read this Forbes article, she just emailed friends for suggestions. At what level of Internet Elite do your simple requests of friends and family transform into viral crowdsourcing efforts?).